Figure 12-2

question 80

Multiple Choice

Figure 12-2. The manager of Stock Division projects the following for next year:
The manager can invest in an additional project that would require $40,000 investment in additional assets and would generate $6,000 of additional income.The company's minimum rate of return is 14%.
Refer to Figure 12-2.Which of the following statements is true?

• A)If the manager invests in the additional project,ROI of the division will decrease.
• B)The residual income of the project is less than the residual income of the division without the project; therefore the project will be rejected.
• C)Average investment for Stock Division will decrease if the project is accepted for investment.
• D)If the manager invests in the additional project,residual income of the division will increase.
• E)none of these.

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